Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. (New section) The
Legislature finds and declares that:

a. Many
thousands of New Jersey homeowners are at risk of losing their homes as a result
of mortgage foreclosures in the immediate future;

b. Foreclosures
involve the loss of a family’s home, which is often the family’s most valuable
financial asset, and foreclosures especially undermine the health and economic
vitality of the urban neighborhoods in which a disproportionate share of
foreclosures take place;

c. Some
homes subject to foreclosure proceedings contain deed restrictions requiring
the homes to be reserved for occupancy by low and moderate income households as
affordable housing as part of the constitutional obligation under the Mt.
Laurel decisions to provide affordable housing;

d. Regulations
that permit affordable housing deed restrictions to be extinguished during
foreclosure proceedings are inconsistent with the constitutional obligation to
provide affordable housing and are particularly detrimental in that they
decrease the availability of affordable housing at a time when more and more
New Jersey residents are faced with difficult economic conditions; and

e. Deed
restrictions should survive a foreclosure in order to enhance the ability of New Jersey residents to
obtain housing they can afford.

2. (New section)
Notwithstanding any rule of the Council on Affordable Housing, the Department
of Community Affairs, or the New Jersey Housing and Mortgage Finance Agency to
the contrary, a deed restriction which was properly recorded in connection with
a property for which a credit against the fair share housing obligation was
granted pursuant to P.L.1985, c.222 (C.52:27D-301 et al.) shall not expire,
extinguish, or be removed prior to the period of termination for such
restriction as a result of the sale of the property through foreclosure
proceedings by any creditor.

3. Section 4 of P.L.1995,
c.244 (C.2A:50-56) is amended to read as follows:

4. a. Upon failure to
perform any obligation of a residential mortgage by the residential mortgage
debtor and before any residential mortgage lender may accelerate the maturity
of any residential mortgage obligation and commence any foreclosure or other
legal action to take possession of the residential property which is the
subject of the mortgage, the residential mortgage lender shall give a notice
of intention to: the residential mortgage debtor, and, if the mortgage
is secured by a residence for which a restriction on affordability was recorded
in the county in which the property is located, the clerk of the municipality
in which the subject property is located, the municipal housing liaison, if one
has been appointed by the municipality pursuant to the regulations of the
Council on Affordable Housing,and the Commissioner of Community
Affairs,[notice
of such intention]
at least 30 days in advance of such action as provided in this section. For
the purposes of this section, “restriction on affordability” means any
conditions recorded with a mortgage or a deed which would limit the sale of
such property to income qualified households pursuant to the rules adopted to
effectuate the “Fair Housing Act,” P.L.1985, c.222 (C52:27D-301 et al.).

b. Notice of intention to
take action as specified in subsection a. of this section shall be in writing,
sent to the debtor by registered or certified mail, return receipt requested,
at the debtor's last known address, and, if different, to the address of the
property which is the subject of the residential mortgage. The notice is
deemed to have been effectuated on the date the notice is delivered in person
or mailed to the party.

c. The written notice
shall clearly and conspicuously state in a manner calculated to make the debtor
aware of the situation:

(1) the particular obligation
or real estate security interest;

(2) the nature of the
default claimed;

(3) the right of the debtor
to cure the default as provided in section 5 of this act;

(4) what performance,
including what sum of money, if any, and interest, shall be tendered to cure
the default as of the date specified under paragraph (5) of this subsection c.;

(5) the date by which the
debtor shall cure the default to avoid initiation of foreclosure proceedings,
which date shall not be less than 30 days after the date the notice is
effective, and the name and address and phone number of a person to whom the
payment or tender shall be made;

(6) that if the debtor does
not cure the default by the date specified under paragraph (5) of this
subsection c., the lender may take steps to terminate the debtor's ownership in
the property by commencing a foreclosure suit in a court of competent
jurisdiction;

(7) that if the lender takes
the steps indicated pursuant to paragraph (6) of this subsection c., a debtor
shall still have the right to cure the default pursuant to section 5 of this
act, but that the debtor shall be responsible for the lender's court costs and
attorneys' fees in an amount not to exceed that amount permitted pursuant to
the Rules Governing the Courts of the State of New Jersey;

(8) the right, if any, of
the debtor to transfer the real estate to another person subject to the
security interest and that the transferee may have the right to cure the
default as provided in this act, subject to the mortgage documents;

(9) that the debtor is
advised to seek counsel from an attorney of the debtor's own choosing
concerning the debtor's residential mortgage default situation, and that, if
the debtor is unable to obtain an attorney, the debtor may communicate with the
New Jersey Bar Association or Lawyer Referral Service in the county in which
the residential property securing the mortgage loan is located; and that, if
the debtor is unable to afford an attorney, the debtor may communicate with the
Legal Services Office in the county in which the property is located;

(10) the possible
availability of financial assistance for curing a default from programs
operated by the State or federal government or nonprofit organizations, if any,
as identified by the Commissioner of Banking and Insurance and, if the
property is subject to restrictions on affordability, the address and phone
number of the municipal affordable housing liasion and of the New Jersey
Housing and Mortgage Finance Agency. This requirement shall be satisfied by
attaching a list of such programs promulgated by the commissioner; and

(11) the name and address of
the lender and the telephone number of a representative of the lender whom the
debtor may contact if the debtor disagrees with the lender's assertion that a
default has occurred or the correctness of the mortgage lender's calculation of
the amount required to cure the default.

d. The notice of intention to
foreclose required to be provided pursuant to this section shall not be
required if the debtor has voluntarily surrendered the property which is the
subject of the residential mortgage.

e. The duty of the lender
under this section to serve notice of intention to foreclose is independent of
any other duty to give notice under the common law, principles of equity, State
or federal statute, or rule of court and of any other right or remedy the
debtor may have as a result of the failure to give such notice.

f. Compliance with this
section shall be set forth in the pleadings of any legal action referred to in
this section. If the plaintiff in any complaint seeking foreclosure of a
residential mortgage alleges that the property subject to the residential
mortgage has been abandoned or voluntarily surrendered, the plaintiff shall
plead the specific facts upon which this allegation is based.

(cf: P.L.2003, c.298, s.1)

4. Section 11 of P.L.1995,
c.244 (C.2A:50-63) is amended to read as follows:

11. a. An optional
foreclosure procedure without sale for the disposition of a foreclosed premises
is hereby established pursuant to subsection b. of this section, wherein a
lender may elect to proceed according to the provisions of this act and
R.4:64-1(d) of the Rules Governing the Courts of the State of New Jersey.

b. Use of the optional
procedure without sale, as provided in this section, shall be permitted only
when:

(1) the debtor has abandoned
the property which is the subject of the residential mortgage;

(2) the debtor has
voluntarily surrendered the property which is the subject of the residential
mortgage by signing a deed in lieu of foreclosure in favor of the lender; [or]

(3) there is no equity in
the property which is the subject of the residential mortgage, as defined in
subsection e. of this section; or

(4) there are no recorded restrictions
on affordability on the property, as defined in section 4 of P.L.1995, c.244
(C.2A:50-56).

c. Pursuant to paragraph
(1) of subsection b. of this section, and for purposes of this section only,
abandonment of the property subject to the residential mortgage shall be
established by an affidavit or certification from an individual having personal
knowledge of the contents thereof, setting forth the specific facts upon which
that conclusion is based. The affidavit or certification shall be submitted to
the office or the court at the same time that the lender applies to the office
or the court for the order fixing the amount, time and place for redemption.

d. Pursuant to paragraph
(2) of subsection b. of this section and for purposes of this section only, if
the lender receives a deed in lieu of foreclosure, the conveyance shall be
effective only if the deed clearly and conspicuously provides: that the debtor
may, without penalty, rescind the conveyance within seven days, excluding
Saturdays, Sundays and legal holidays; and that such [recision]
rescission is effective upon delivery of a written notice to
the lender or its agent or upon mailing of such notice to the lender or its
agent by certified or registered mail, return receipt requested.

e. (1) For purposes of paragraph
(3) of subsection b. of this section, a property subject to a residential
mortgage shall be deemed to have no equity if the total unpaid balance of all
liens and encumbrances against the property, including mortgages, tax liens and
judgments actually against the property (not including similar name judgments),
and any other lien, is equal to or greater than 92 percent of the fair market
value of the property. An affidavit setting forth with specificity the fair
market value of the property, the unpaid balance of the obligation, including
all mortgages and liens and the method by which the lender determined that the
property has no equity, shall be submitted to the office or the court at the
time the lender applies for the order fixing the amount, time and place for
redemption.

(2) If a lender proceeds
with the optional procedure under this subsection, and if the debtor has not
objected and requested a public sale pursuant to this section, when the
foreclosed property is resold by the lender following judgment and provided the
resale price received by the lender is in excess of the amount necessary to
repay the debt, interest and reasonable costs of the lender, and all carrying
charges, including, but not limited to, the reasonable costs of maintenance and
resale, the lender shall deposit any such excess in accordance with R.4:57 et
seq. of the Rules Governing the Courts of the State of New Jersey.

(3) Upon deposit of any such
excess with the Superior Court, the lender shall notify the debtor and any lien
holder who held a lien junior to the lender and whose lien was lost in whole or
in part as a result of the foreclosure. Such notification shall be by
certified mail, return receipt requested, to the last known address of the
debtor and such lien holders. The debtor and the lien holders shall then have
six months to make an application to the Superior Court, in the form of an
application for surplus funds, upon appropriate notice to all other parties in
interest, to seek an order for turnover of the excess funds. Failure of a
lender to comply with the provisions of paragraphs (2) and (3) of this
subsection e. shall not affect title to the foreclosed property.

f. (1) In accordance with
the provisions of R.4:64-1(d) of the Rules Governing the Courts of the State of
New Jersey, and subject to compliance with the provisions of this act, a lender
may elect to proceed with the optional procedure by filing an affidavit or
certification with the office or the court.

(2) The affidavit or
certification shall set forth the facts which the lender alleges show that it
is entitled to proceed under one or more paragraphs of subsection b. of this
section and shall be supported by the proofs required by this section and such
other proofs as may be required by the office or the court.

g. In accordance with the
provisions of R.4:64-1(d) of the Rules Governing the Courts of the State of New
Jersey, and subject to compliance with the provisions of this act, the office
or the court may enter an order fixing the amount, time, and place for
redemption, which shall be not less than 45 days nor more than 60 days after
the date of the order. The office or the court may grant an extension of time
for good cause shown. The order shall provide that:

(1) the redeeming defendant
pay to the plaintiff's attorney the amount fixed by the office or the court for
redemption, together with interest to the date of redemption, plus all court
costs;

(2) redemption shall be by
cash, cashier's check or certified check and made at the office of the
plaintiff's attorney, if such office is located in the county where the
property is situated, or at such other place as designated by the office or the
court, between the hours of 9:00 a.m. and 4:00 p.m. of the date set by the
office or the court in the order; and

(3) in the absence of
redemption, the defendants shall stand absolutely debarred and foreclosed from
all equity of redemption.

h. (1) The order for
redemption or notice thereof shall be mailed to each defendant's last known
address and, if different, also to the address of the property being
foreclosed. The order for redemption or notice thereof shall be sent by
ordinary mail and certified mail, return receipt requested, within 20 days
after the date the order is entered, except that, as to defendants whose
addresses are unknown and who were served by publication, no further
publication of the order for redemption or notice thereof need be made.

(2) The notice shall:

(a) inform the defendants
that the plaintiff is proceeding under an optional procedure authorized by
section 11 of this act and set out the steps of the optional procedure;

(b) inform all defendants of
the terms and conditions under which a defendant may request a public sale of
the mortgaged premises pursuant to subsection i. of this section; and

(c) clearly state that no
request for a public sale made after 30 days from the date of service will be
granted, except for good cause shown.

i. In any matter in which
the office or the court has issued an order for redemption and the lender is
permitted to proceed by the optional procedure, a defendant who wishes to
object to the optional procedure and request a public sale with respect to the
mortgaged premises being foreclosed, shall submit to the office or the court a
written request for a public sale within 30 days of the date the order or
notice thereof is served. If a defendant requests a public sale within the
required time period, and subject to compliance with the provisions of this
act, the office or court shall enter a judgment of foreclosure which provides
for a public sale of the premises in accordance with applicable law. Any such
defendant who requests a public sale, other than a natural person who is the
owner or a voluntary transferee from that owner, shall be required to post a
cash deposit or bond prior to the date fixed for redemption. This cash deposit
or bond shall be in an amount which is 10% of the amount found due in the order
fixing the amount, time and place for redemption and shall be held to secure the
plaintiff against any additional interest and costs, as well as any deficiency,
as a result of the public sale. The office or the court may dispense with this
requirement for good cause shown. The defendant who requests a public sale,
other than a natural person who is the owner or a voluntary transferee from
that owner, shall pay all expenses and costs associated with the public sale,
including, but not limited to, all sheriff's fees and commissions.

j. In the event of any
dispute among defendants over the right to redeem, the court shall enter such
order as is necessary to secure the plaintiff pending the resolution of the
dispute, including, but not limited to, payment of plaintiff's additional
interest and costs which accrue as a result of the dispute.

k. Upon redemption, the
plaintiff shall furnish the redemptioner with an appropriate certificate of
redemption and the redemptioner shall acquire all rights provided by law and
equity but shall not be entitled to a deed or title to the mortgaged premises
solely by virtue of the redemption. A redemptioner in proper cases may proceed
to foreclose the redemptioner's interest.

l. In the absence of
redemption, and on proof of mailing of the order for redemption or notice
thereof pursuant to subsection h. of this section and an affidavit of
non-redemption, the plaintiff shall be entitled to a judgment debarring and
foreclosing the equity of redemption of the defendants and each of them and any
person claiming by, through or under them, and adjudging the plaintiff be
vested with a valid and indefeasible estate in the mortgaged premises.
Anything to the contrary notwithstanding, redemption shall be permitted at any
time up until the entry of judgment including the whole of the last day upon
which judgment is entered. A certified copy of the judgment shall be accepted
for recording by the county recording officer pursuant to P.L.1939, c.170
(C.46:16-1.1).

m. Upon entry of a judgment
vesting title in the plaintiff pursuant to subsection l. of this section, the debt
which was secured by the foreclosed mortgage shall be deemed satisfied, and the
plaintiff shall not be permitted to institute any further or contemporaneous
action for the collection of the debt.

(cf: P.L.1995, c.244, s.11)

5. This act shall take effect
immediately.

STATEMENT

This bill requires that in the
event a creditor obtains a judgment for foreclosure on a residential property
that contains an affordable housing deed restriction, the deed restriction is
not extinguished as a result of the foreclosure.

The bill also amends
foreclosure laws to require notice be given to the municipal clerk and the
Commissioner of Community Affairs whenever a debtor is given notice that a
foreclosure is pending on residential property that is a unit of affordable
housing subject to affordability controls. The foreclosing lender is also
required to furnish the debtor with the address and phone number of the
municipal affordable housing manager and the New Jersey Housing and Mortgage
Finance Agency. The bill removes the ability of a foreclosing lender to use
alternative methods of foreclosure not requiring a public sale when the housing
unit involved is subject to affordability controls.